Taxes in the spotlight of budget debate

Taxes in the spotlight of budget debate [Worcester Telegram & Gazette]

By Steve LeBlanc THE ASSOCIATED PRESS
April 27, 2009

BOSTON -  Massachusetts House lawmakers are bracing for the legislative equivalent of a root canal without Novocain: a debate on how to raise the most new tax dollars while angering the fewest voters.

There is no shortage of ideas for lawmakers to pick from when they launch their budget debate today by first deciding which - if any - taxes to raise, and by how much.

There are proposals to increase the state gas tax by 29 cents per gallon; to extend the sales tax to exempted categories like clothing and services; to tax candy, alcohol and soda; to give cities and towns the authority to tax restaurant meals and hotel rooms; and to begin taxing real estate owned by charities.

And then, of course, there’s the “no new taxes” option.

The House Ways and Means Committee has released a stripped-down budget that relied on no new taxes and drew no new money from the state’s savings accounts. Critics said the bare-bones spending plan was designed in part to rattle lawmakers into supporting taxes.

Whether that was the intention, it’s having that effect - at least for some. They say the national recession is forcing them to make tough decisions both to cut spending and raise taxes just to make ends meet.

“We cannot tax ourselves out of this situation, but it is absolutely not fair to our constituents to try to solve this only on cuts,” said Rep. Byron Rushing, D-Boston. “I think we have to have a combination.”

One idea that seemed to be gaining some traction among House lawmakers is a hike in the state sales tax, from the current 5 percent to 6 percent or 7 percent.

A 1 percent increase in the sales tax would bring in an additional $725 million in the fiscal year that begins July 1, according to estimates released Friday by the business-backed Massachusetts Taxpayers Foundation.

That would come at a cost of an extra $122 per taxpayer or $322 per family annually.

Even if the state sales tax jumps to 6 percent, Massachusetts would still rank relatively low compared to other states, according to the group.

Currently, of the 45 states with a broad-based sales tax, Massachusetts ranks last when measuring the amount of sales tax collected per $1,000 of income - in part because its sales tax is much narrower than in other states, exempting food, services and clothing under $175.

If the tax rose to 6 percent, Massachusetts’ national rank would creep up from 45 to 42.

On Friday, House Speaker Robert DeLeo, D-Winthrop, met with members of his leadership team and committee chairmen. Afterward, he issued a statement that gave few hints of which way the House might go, other than to say “some members expressed interest in a number of revenue tools, including the sales tax.”

House Ways and Means Chairman Charles Murphy, D-Burlington, also refused to be pinned down other than to point out that there are about 70 tax and revenue budget amendments.

“If the will of the House is such that a majority of members want a tax increase, there will be a tax increase,” he said.

If not, Murphy said, lawmakers can always fall back on the budget his committee recommended.

Revenue Committee Chairman Jay Kaufman, D-Lexington, said that’s not a realistic option.

“I can’t imagine being able to deliver the kinds of services our public needs absent some additional revenues,” he said.

Not everyone supports higher taxes, particularly an increase in the sales levy.

House Republicans and local businesses are planning a Monday morning press conference to oppose any increase in the sales tax.

Jon Hurst, president of the Retailers Association of Massachusetts, said a sales tax hike will deal a strikeout to strapped local shop owners struggling to hold onto consumers already migrating online or across the state line to tax-free New Hampshire.

“Strike one for Main Street Massachusetts is New Hampshire. Strike two is the Internet. Strike three is a 20 (percent) or 40 percent increase in the sales tax,” he said.

Gov. Deval L. Patrick said he’s also “skeptical” of a sales tax hike, although he didn’t say whether he would veto the proposal if it reached his desk.

Patrick has offered his own series of tax hikes, including a 19-cent increase in the state gasoline tax to help Massachusetts’ struggling transportation infrastructure and extending the sales tax to alcohol, candy and soda to raise more money for public health programs.

Patrick also wants to allow cities and towns to raise more local revenues by taxing restaurant meals and hotel rooms. “If we are going to ask more from people, then we ought to do it ... in targeted ways and not for general purposes,” he said.

There will be other voices in favor of higher taxes rallying at the Statehouse today.

A group representing service workers say they plan to converge on the building at noon, just as debate is scheduled to get under way, to press lawmakers to raise taxes to avoid some of the more draconian cuts.